NCVO will be responding to the consultation, so we need to hear from our members what they think about the proposals. This blog summarises they key issues and provides an opportunity for you to comment and share your views.

Why is the Annual Return important?

All registered charities with annual income over £10k, and all charitable incorporated organisations (CIOs) must complete and submit an Annual Return within 10 months of the financial year end. The Annual Return provides a snapshot of the charity’s financial information, and enables the Charity Commission to:

identify any regulatory concerns (either within a particular charity or more generally within the sector)

For many charities, when they submit their annual return is the only time they interact with the Charity Commission.

Why are the changes being proposed?

This consultation is the second part of a two-year project that the Charity Commission has been carrying out to review the key information it collects and displays from charities.

The Commission is undergoing a digital transformation and, using the new technology available, it wants to structure the annual return so it is more dynamic and easier to use for charities. The aim is for charities that are smaller and with simpler operating structures to answer fewer questions, whereas those that are larger and more complex will be required to answer more.

The Commission has also identified a number of new areas of questioning, due to the public interest in the information or because it believes the information will enable it to be a more adept risk-based regulator.

What are the changes proposed?

The changes proposed will affect both the structure and the content of the AR18.

Update Charity Detail (UCD) service

A new Update Charity Detail (‘UCD’) service will mean that charities can inform the Commission about changes to their registered details, key activities and policies.

This will be available at any time throughout the year, so charities can update their entry as changes happen.

The UCD service also means that:

Completing the Annual Return each year should be much simpler and quicker, because if the charity’s details have been kept up-to-date, it will be necessary simply to confirm their accuracy

The questions in the Annual Return will be tailored to their circumstances, based on the information provided in the UCD

Charities can receive updates and alerts from the Commission that are specific to their needs

Additional regulatory questions

The Commission is also proposing to introduce a number of new questions in the AR18.

These are:

Whether the charity works with a professional fundraiser and, if so, whether it has a signed contract in place.

How many contracts has the charity received from central or local government, and what is their total value.

How many grants has the charity received from central or local government, and what is their total value.

How much Gift Aid has the charity claimed for the financial period.

Whether the charity has received income from outside the UK? If the charity has received income from abroad, it will be asked to specify the countries of origin, the amount of income and the source (eg. government body, NGO, private company, etc.)

Whether any of the charity’s staff has been paid a salary of £60,000 or more.

How much the charity’s chief executive is paid.

Whether any of the charity’s trustees have been paid (for being a trustee or for providing professional advice) or received any benefits from the charity.

Key issues for charities to consider

As you can see, the number and breadth of questions that are being proposed is considerable. This is in part due to the fact that the last time the Commission made significant changes to the annual return was 2013, and since then technology has developed to provide a lot of opportunities.

The Commission is also responding to the growing public interest in charities, in particular around salaries and overseas operations.

Transparency vs. Regulation

Here at NCVO we are supportive of transparency and we agree that, if there is a public interest or concern about how charities operate or are funded, we should try to respond to that by being open and able to respond to the questions we are asked (either by the media or the public).

But is it the Commission’s role to be asking information purely for transparency purposes? There is a difference between data required for transparency and data for the Commission to collect so it can assess risk and identify issues that need further investigation. Arguably the Commission should focus on the latter, not only because that would enable it to carry out its regulatory role more effectively, but also because it could face reputational damage if it is seen to not be acting on information that it has requested.

Annual Return vs. Annual Report

Another important question is whether the annual return is the most appropriate place for this information to be displayed: we know that issues such as CEO pay and certain types of income and expenditure can easily be misinterpreted if not explained and set into the individual charity’s context (that’s why for example our report on charity senior executive pay (PDF, 1.6MB) recommended that charities publish an annual statement explaining their ethos and policy on remuneration). The Annual Return may be too much of a blunt instrument to capture the complexities of this information.

So isn’t the trustees’ annual report a better place for charities to provide this information?

Information vs. Duplication

Some of the information that the proposed changes would provide (for example disclosures around government grants received, payments to trustees) is already required by the SORP to be included in the annual accounts and report, which are filed alongside the annual return. All these documents are uploaded to the register of charities and are therefore on public record.

It’s important that we hear from you

These are just some questions we have been asking ourselves when looking at the Commission’s proposals, but you may have more and we want to hear them. We also would welcome your view on the specific questions that are being proposed.

The consultation is open until 24 November, so there is still plenty of time for you to leave a comment below or email me directly.

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Elizabeth is head of policy and public services at NCVO. She has been part of the policy team since 2008, as the expert on charity law and regulation. Her policy interests also include charity campaigning, the sector’s independence, transparency, and accountability.